Tax Changes Could Limit City Growth

September 20, 1986|By GOLDIE BLUMENSTYK, The Orlando Sentinel

Proposed changes in federal tax laws will make it more costly and more complicated for local governments to use bonds to finance airports, zoos, parking garages and other facilities, an expert told the Florida League of Cities on Friday.

Frank Shafroth, director of federal relations for the National League of Cities in Washington, D.C., was in Orlando to brief officials attending the Florida League`s annual convention.

The Tax Reform Act, which Congress is expected to approve next week, will limit the kinds of projects eligible to be financed with tax-free bonds.

In some cases, cities could no longer issue traditional tax-free bonds for projects if private users would receive 10 percent or more of the benefits.

For example, the new rules would severely restrict a government`s ability to use tax-free bonds to build an arena for a professional sports team.

Shafroth said the change probably will not affect the 15,000-seat arena planned for downtown Orlando because bonds for that project were sold before the retroactive Sept. 1 cutoff date.

Plans for a zoo in Orlando`s Turkey Lake Park, however, could be affected. Voters in Orange County are being asked in November to approve a special property tax. If the tax is approved, bonds backed by the tax proceeds may be sold to help build the zoo.

But if zoo backers try to use private financing to build part of the zoo or allow a private company to operate a refreshment stand there, the bonds could be declared ``private activity`` bonds and would not necessarily be tax- free for some buyers.

Local governments will have to pay a higher interest rate on bonds that are not tax-exempt.

In other business Friday, a league committee nominated Orlando City Council member Glenda Hood as president for the coming year. The full membership is scheduled to vote on the selection today.